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Kenya is set to overtake Ethiopia as East Africa’s largest economy in 2025, according to new projections from the International Monetary Fund (IMF), The shift comes in the wake of a sharp devaluation of the Ethiopian birr last July, part of a broader effort to stabilize the economy and advance long-delayed debt restructuring talks…
The IMF forecasts Kenya’s gross domestic product (GDP) will climb to $132 billion in 2025, surpassing Ethiopia’s projected $117 billion, Ethiopia’s decision to liberalize its exchange rate system and allow the birr to depreciate significantly, by more than 55%, helped unlock a $3.4 billion IMF loan package and an additional $16.6 billion in financial support from the World Bank.
The devaluation also opened the door for negotiations with international creditors to restructure at least half of the country’s $28.9 billion in external debt, Bloomberg reported.
While the financial support offers breathing room for Ethiopia’s debt-strapped economy, the steep currency depreciation has also pushed up the cost of imports, adding to inflationary pressures in a country already grappling with economic strain from conflict and climate-related challenges.
Kenya’s economic stand
In contrast, Kenya has managed to maintain relative macroeconomic stability, even as it faces its own set of fiscal challenges. Its diversified economy, robust financial sector, and more stable exchange rate have helped it edge ahead in the race to lead East Africa economically.
In contrast, Kenya has managed to maintain relative macroeconomic stability, even as it faces its own set of fiscal challenges. Its diversified economy, robust financial sector, and more stable exchange rate have helped it edge ahead in the race to lead East Africa economically.
